On the 12th of March, the Federal Government announced their first economic response to the Coronavirus consisting of $17.6b of measures.
It quickly became obvious that those measures would be insufficient to address the economic fall-out of Coronavirus pandemic, with a further announcement made on the 22nd of March. This second announcement included adjustments that built on many of the measures previously announced, in particular the measure labelled “boosting cash flow for employers”.
This Cash Flow Boost is the most significant Federal Government assistance for small or medium sized enterprises (SMEs) and charities/NFPs, being those with aggregated annual turnover of less than $50m.
The Cash Flow Boost will consist of two rounds of payments calculated by reference to the Pay As You Go (PAYG) withholding deducted from wages and similar payments.
The payments received will be “Non-Assessable Non-Exempt” income. This means that they will not be subject to income tax and, unlike “Exempt” income, will not reduce the amount of tax losses that can be claimed in future. The payments will also be GST free.
The first payments will be available where an organisation has paid wages or other similar payments during the period, irrespective of whether there has been any PAYG withholding deducted. In other words, access to the Cash Flow Boost will be driven by the reporting of an amount at Label W1 total salary, wages and other payments on the relevant Activity Statement lodged with the ATO.
This ensures that organisations that pay wages but that don’t need to withhold tax (eg because an employee earns a wage that is less than the tax free threshold), will still receive a payment.
The method for calculating the amount of the first payment will vary depending on the reporting cycle applicable for PAYG withholding as follows:
Quarterly Lodgers
Quarterly lodgers will be entitled to the greater of:
- $10,000; or
- 100% of the PAYG withholding reported on the quarterly BAS for each of the quarters ending 31 March 2020 & 30 June 2020.
Capped to a maximum of $50,000.
Monthly Lodgers & Large Withholders
Organisations that report their PAYG withholding obligations monthly or that are “Large Withholders” will receive the greater of $10,000 or:
- 300% of the PAYG withholding reported for the month of March 2020; plus
- 100% of the PAYG withholding reported for the months of April, May & June 2020.
Capped to a maximum of $50,000.
The first payment will be automatically processed at the time of lodgement of the relevant activity statements and will be delivered as a credit to the organisations Integrated Client Account (BAS account) with the ATO. To the extent that this credit places the account in a refund position, the ATO will remit that surplus as a cash payment within fourteen days.
Special rules will apply for Large Withholders to determine the timing of payment. If your organisation is a Large Withholder, we recommend that you get in touch for more specific advice.
There will then be a second round of payments that will match the amount received in the first round and will be delivered as follows:
Quarterly Lodgers
- 50% of the amount received in the first round on lodgement of the BAS for the quarter ending 30 June 2020; plus
- 50% of the amount received in the first round on lodgement of the BAS for the quarter ending 30 September 2020.
Monthly Lodgers
- 25% of the amount received in the first round on lodgement of the BAS for the period ending 30 June 2020; plus
- 25% of the amount received in the first round on lodgement of the BAS/IAS for the month ending 31 July 2020; plus
- 25% of the amount received in the first round on lodgement of the BAS/IAS for the month ending 31 August 2020; plus
- 25% of the amount received in the first round on lodgement of the BAS for the period ending 30 September 2020.
As above, special rules will apply for Large Withholders. We encourage Large Withholders to contact our office for specific guidance on when they will receive their second round payments.
The following are some examples to illustrate how the Cash Flow Boost payments will be made:
Quarterly Lodger Example 1
A business that has PAYG withholding of $3,000 per quarter for both the quarters ending 31 March 2020 and 30 June 2020 will receive:
- $10,000 for round one upon lodgement of the BAS for the quarter ending 31 March 2020; plus
- $5,000 for round two upon lodgement of the BAS for the quarter ending 30 June 2020; plus
- $5,000 for round two upon lodgement of the BAS for the quarter ending 30 September 2020.
Total received: $20,000.
Quarterly Lodger Example 2
A business that has PAYG withholding of $15,000 per quarter for both the quarters ending 31 March 2020 and 30 June 2020 will receive:
- $15,000 for round one upon lodgement of the BAS for the quarter ending 31 March 2020; plus
- $30,000 ($15,000 for round one + $15,000 for round two) upon lodgement of the BAS for the quarter ending 30 June 2020; plus
- $15,000 for round two upon lodgement of the BAS for the quarter ending 30 September 2020.
Total received: $60,000.
Quarterly Lodger Example 3
A business that has PAYG withholding of $30,000 per quarter for both the quarters ending 31 March 2020 and 30 June 2020 will receive:
- $30,000 for round one upon lodgement of the BAS for the quarter ending 31 March 2020; plus
- $45,000 ($20,000 for round one to cap of $50,000 + $25,000 for round two) upon lodgement of the BAS for the quarter ending 30 June 2020; plus
- $25,000 for round two upon lodgement of the BAS for the quarter ending 30 September 2020.
Total received: $100,000.
Monthly Lodger Example 1
A business that has PAYG withholding of $1,000 per month from March to June 2020 will receive:
- $10,000 for round one upon lodgement of the BAS for the period ending 31 March 2020; plus
- $2,500 for round two upon lodgement of the BAS for the period ending 30 June 2020; plus
- $2,500 for round two upon lodgement of the BAS/IAS for July 2020; plus
- $2,500 for round two upon lodgement of the BAS/IAS for August 2020; plus
- $2,500 for round two upon lodgement of the BAS for the period ending 30 September 2020.
Total received: $20,000.
Monthly Lodger Example 2
A business that has PAYG withholding of $5,000 per month from March to June 2020 will receive:
- $15,000 for round one upon lodgement of the BAS for the period ending 31 March 2020; plus
- $5,000 for round one upon lodgement of the BAS/IAS for April 2020; plus
- $5,000 for round one upon lodgement of the BAS/IAS for May 2020; plus
- $12,500 ($5,000 for round one + $7,500 for round two) upon lodgement of the BAS for the period ending 30 June 2020; plus
- $7,500 for round two upon lodgement of the BAS/IAS for July 2020; plus
- $7,500 for round two upon lodgement of the BAS/IAS for August 2020; plus
- $7,500 for round two upon lodgement of the BAS for the period ending 30 September 2020.
Total received: $60,000.
Monthly Lodger Example 3
A business that has PAYG withholding of $15,000 per month from March to June 2020 will receive:
- $45,000 for round one upon lodgement of the BAS for the period ending 31 March 2020; plus
- $5,000 for round one to $50,000 cap upon lodgement of the BAS/IAS for April 2020; plus
- $12,500 for round two upon lodgement of the BAS for the period ending 30 June 2020; plus
- $12,500 for round two upon lodgement of the BAS/IAS for July 2020; plus
- $12,500 for round two upon lodgement of the BAS/IAS for August 2020; plus
- $12,500 for round two upon lodgement of the BAS for the period ending 30 September 2020.
Total received: $100,000.
With the payments linked to the amount of PAYG withheld from wages, there is a temptation for businesses to seek to artificially inflate that amount. We recommend in the strongest terms that organisations resist this temptation.
Any such schemes would make the organisation ineligible for the full amount of both round one and round two of the Cash Flow Boost. Penalties, interest and other sanctions may also be applied.
We hope that this article provides some clarity on how your organisation may be able to access the Cash Flow Boost. If you require further information, or would like to better understand how the Cash Flow Boost may apply to your specific circumstances, please get in touch.
Sky Accountants Ballarat
Phone: 1300 328 855
Office Address: 902 Howitt Street, Wendouree, Victoria 3355, Australia
Postal Address: PO Box 2234, Bakery Hill, Victoria 3354
Sky Accountants Gisborne & Macedon Ranges
Phone: 03 97444522
Office Address: 45 Hamilton Street, Gisborne, Victoria 3437, Australia
Postal Address: PO Box 270 Gisborne Victoria 3437